Government Ramps Up Tax Surveillance on Crypto
India's government is going full throttle on crypto tax enforcement, revealing a series of new measures in parliament this week to crack down on virtual digital asset (VDA) evasion. In a statement to the Lok Sabha, Minister of State for Finance Pankaj Chaudhary confirmed that tax revenues from crypto have surged since the introduction of section 115BBH of the Income Tax Act during fiscal year 2022–23.
The measure has yielded ₹269.09 crore ($32 million) in its first year, followed by ₹437.43 crore ($52 million) in 2023–24. With the 2024–25 tax deadline yet to pass, the final figure is pending—but all signs point to continued growth.
Chaudhary emphasized the use of data analytics tools to trace underreported income and boost compliance.
These tools include Project Insight, the Non-Filer Monitoring System (NMS), and internal tax department databases.
Spotting Crypto Gaps Through Forensic Monitoring
While India doesn’t yet have a real-time matching system between TDS filings and income tax returns for crypto, retrospective analysis has been crucial. Cases where TDS was deducted but income not disclosed over ₹1 lakh ($1,200) triggered outreach efforts under the NUDGE initiative. These notices prompt taxpayers to amend or explain mismatched filings related to crypto holdings and trades.
The current tax regime on crypto includes a 30% flat income tax on VDA profits, with no deductions other than acquisition cost. Additionally, a 1% TDS is applied to monitor larger transactions. This framework has proven controversial but is being tightened further with greater tech deployment and market surveillance.
International platforms are also feeling the heat. Bybit recently announced it would begin charging 18% GST on service fees for Indian users, aligning with India's goods and services tax laws that apply to overseas companies offering services to Indian residents.
Building a Crypto-Educated Enforcement Force
To support this aggressive stance, India is training its tax enforcement staff in crypto-specific areas.
These include digital forensics, blockchain analytics, and legal workshops designed to help officers investigate complex VDA-based tax evasion.
Specialized training occurs across the country via Chintan Shivirs, webinars, and short courses at institutions like the National Forensic Science University in Goa. These programs are aimed at transforming frontline tax officials into crypto-literate auditors capable of keeping up with fast-evolving blockchain transactions.
Crypto Oversight Could Help Plug Economic Blind Spots
Chaudhary admitted that many crypto transactions escape regulatory radar, leading to underreported income and policy blind spots. These gaps undermine accurate economic forecasting and affect India’s broader tax base. By enhancing visibility through tech and enforcement, the government hopes to integrate crypto into the formal economy—both to increase revenue and better understand market dynamics.
India’s aggressive approach is part of a global trend of clamping down on decentralized finance, especially as adoption spreads beyond speculative trading into everyday transactions and business operations. With millions of Indians now transacting in crypto, the need for oversight is no longer theoretical—it’s essential.
